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BUSINESS STUDIES
FORM THREE
PAPER 2
TIME: 2½ HOURS
INSTRUCTIONS TO CANDIDATES:
Qs 1 2 3 4 5 6 Total scores
Mks
1.a) Explain five reasons why it is important for an entrepreneur to have a business plan.
(10mks)
b) Explain five ways in which the stock exchange market facilitates the growth of the
country’s economy. (10mks)
1. a) Outline five problems that are likely to be encountered when measuring national
income. (10mks)
b) Explain five factors that a trader should consider before giving credit. (10mks)
b) Explain five sources of business ideas that a potential investor can use when making
investment decision. (10mks)
3. a) Explain five ways in which the government can create an environment that is
conducive for doing business. (10mks)
b) The following balances were extracted from Witu books of accounts on January 2017;
Motor vehicles 250, 000
Furniture 8, 000
Stock 37, 000
Debtors 20, 000
Cash at bank 15, 000
Cash in hand 5, 500
ADC loan 100, 000
Creditors 12, 000
Capital 224, 000
The following transactions took place during the month.
January 1 deposited an additional shs.30, 000 from private sources into the business
bank account.
January 5 issued a cheque for shs. 80, 000 to ADB bank which was honoured by the
bank.
10 sold goods whose cost was shs.3, 500 at shs.7, 000 and received the
proceeds by the cheque.
15 bought a new motor vehicle worth shs.50,000 having borrowed an
additional loan from ADB bank.
17 took goods worth shs. 1, 200 to be used by his family.
20 sold one of the old motorvehicles whose book value was shs.27, 000 at
shs. 22, 000 on credit.
25 received cash shs.15, 000 from a debtor.
29 paid a creditor by chequeshs.8, 500
30 bought more goods on credit worth shs. 3, 200
5. a) Despite the economies of scale enjoyed by large firms, some firms continue to operate
on small scale basis. Explain five reasons. (10mks)
b) Explain five reasons why several competing firms would combine and form one firm.
(10mks)